Topsy-turvy revenue projections have legislature looking at cuts

The biennial budget session of the Wyoming Legislature is often called the “short session,” because it is a 20-day, rather than a 40-day, session. But for members of the Appropriations Committee, the process of forging a budget is anything but short.

Sen. Ray Peterson of Lovell has already attended four weeks of budget meetings – one week in December, three in January — as a member of the Senate Appropriations Committee, working as a member of the Joint Appropriations Committee (Senate and House together) to prepare a budget in concert with Gov. Matt Mead.

Senator Ray Peterson

It has been an arduous process this year, Peterson said during an interview last Thursday, with revenue estimates plunging with the price of natural gas. In October, the Consensus Revenue Estimating Group, based on the price of natural gas in the range of $4 per thousand cubic feet, presented an estimated revenue report to the state for the 2013-14 biennium, but with gas prices expected to fall, Gov. Mead was cautious in his approach to the new budget, Peterson said.

As state agencies started presenting their budget requests in October and November, the governor asked agencies to consider a 2 percent cut in their exception (not standard) budgets. He reviewed the budget requests in early December and presented a budget to the JAC.

The JAC began meeting one-by-one with all state agencies in December and continued into January. Wary of falling prices, the JAC asked agencies to prepare contingency cuts of 2, 4 and 8 percent – about the time the price of natural gas fell to $3.25 per MCF.

“We reviewed their exception requests, things in addition to their standard budget, to get a better understanding of why they’re requesting extra money,” Peterson said. “We go through each department that way, some 200 different departments and agencies, from the departments of Health and Education to the Board of Barber Examiners.

“We had inklings when we met in December that revenue would be on the downturn, but the governor still thought at the end of December that we would get by with a 2 percent cut. The JAC was thinking 4 percent or more.”

When the CREG report came out again in January, the revenue report moved from a projected surplus of $245 million to $50 million “under water,” Peterson said, “a $300 million swin

g.”

The plunging revenue estimates made the process hard on the governor, the agencies and the JAC.

“He had to go back and rework his budget, and we were in the process of going through agencies,” Peterson said. “The governor had to submit eight different letters changing his budget recommendations.

“It’s a moving target. He put off the external cost adjustment (cost of living adjustment) until January, and then said to freeze the ECA and flatline everyone’s standard budget to the (levels of the) last biennium and only allow exception budget items for things like computer software, equipment and things that needed to be upgraded.”

Peterson said the cost of natural gas was expected to drop below $3, and indeed, the State Economic Analysis Division said last week that gas at Wyoming’s Opal Hub was selling at $2.75 per MCF due to warmer winter weather and abundant supplies.

Peterson said CREG estimates an average of $3.50 MCF in 2013 and $3.75 in 2014.

“There’s surplus in storage,” Peterson said. “It’s just not moving. Gas has 80 percent of the effect on our valuation. It’s a huge player. It used to be coal and oil, but they are not the players natural gas is.”

Session schedule

The budget session convenes next Monday, Feb. 13, and Peterson said the first two weeks will be taken up by regular bills and issues, including redistricting. Work on the budget bill – actually mirror bills that start in both the House and the Senate – will begin in the third week of the session, around Feb. 27, and each member of the JAC will present agency requests to the full legislature.

Any senator (or representative) can stand up and ask questions as Peterson and other members of the JAC defend the JAC’s recommendations.

“Our position is to defend our recommendation, and most of the time we agree with the governor’s request,” Peterson said.

The hard part, he added, is that there are 30 senators and 60 representatives, and “everyone has their special interest.”

“All of the agencies have their favorite legislators,” Peterson said, “their champion on the floor to revive something (that was cut). The JAC is trying to hold the line on

spending. We budgeted everything but $20 million to play with. That’s not a lot. We cut it pretty close.”

Local government

The governor’s budget calls for an appropriation for local government (cities, towns and counties) of $135 million over the next biennium, but one minor adjustment the JAC made, Peterson said, was changing the distribution from a 50-50 split between direct distribution and the consensus block grant (for capital construction) to a 60-40 split in favor of direct distribution – funding that flows directly to municipalities and counties in two equal payments at the start of each year of the biennium – Aug. 15, 2012 and Aug. 15, 2013.

The idea, Peterson said, is to give municipalities a more steady revenue flow and hope that gas prices improve enough by the 2013 general session to alloc

ate additional money to the consensus block grant program and the State Loan and Investment Board, which has happened in recent years.

“I keep arguing for SLIB,” Peterson said, noting that the consensus block grant program must work with myriad communities and special districts, especially in a county like Big Horn County.

Looking at other funding areas, Peterson said Big Horn County School District No. 2 is still in line to receive $5.5 million for its remodel of Lovell High School through the School Facilities Commission.

Lovell has already completed Phase I of the remodel – an electrical upgrade, new windows and heating and air conditioning. The $5.5 million appropriation would fund Phase II and Phase III. Phase II is for fine arts and vocational education including a multipurpose room and a kitchen. Phase III is for upgrading the rest of the classroom space in the high school.

Peterson said Northwest College is also still in line to receive $13 million for additional facilities.

Peterson said he is filing one individual bill this session, reviving his bill concerning Medicaid fraud under the False Claim Act of Wyoming. The bill would allow the Wyoming Attorney General’s Office through the Medicaid Fraud Division to go after fraudulent claims in civil court.

Currently, he said, the state must wait for the federal government to prosecute a case. The bill would allow the AG’s office to go directly after providers that file false claims and not have to wait on the federal government. Later, he said, he would like to see the state tighten up its own procedures for Medicaid monitoring with better software and accountability.